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Nondeductible IRA contribution limits

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Q: I'm 56, my wife is 55 and both of our kids graduated from college. I maxed out my 403(b) plan at work last year, but I still want to increase my retirement savings. If we're over the income limit for Roth IRAs, can we both contribute to nondeductible IRAs? T.R., Logan, Utah

A: Yes. As with a Roth IRA, the 2003 limit for contributions to a traditional IRA (whether deductible or not) is $3,000. Because you're both over age 50, you can contribute an extra $500. So you and your spouse collectively can contribute up to $7,000 this year (assuming you and your spouse have at least $7,000 of earned income together). Only the earnings from the nondeductible IRA will be taxed when withdrawn. In comparison, Roth IRA distributions may be tax-free after five years, but Roth IRAs are not available to joint-filing taxpayers with an adjusted gross income above $160,000. You can make your 2003 IRA contribution up until April 15, 2004. Tip: Another option for you is to have your spouse begin (or increase) contributions to her employer-sponsored retirement plan.

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